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2022 (4) TMI 1479
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....g the settled position of law that provisions of section 153A, in cases where proceedings are not pending could not be applied in absence of any incriminating material. 3. BECAUSE the reliance on 'reports of investigation wing' etc. did not constitute 'material' relevant for the purpose of assessment in this case, as the 'appellant' had never been confronted with the same in right perspective and as such the addition made on the basis of such an ex-parte information and reports etc. is wholly vitiated. 4. BECAUSE the computation of income was not even relevant for the purpose of assessment and the same is vitiated, as during the course of search (even in pursuance of joint warrant of Authorization), no incriminating material was found which could impinge upon the genuineness of the unsecured loan & genuineness of capital gain as shown in the return of Income. 5. BECAUSE the learned CIT(A) has erred in law and on facts in confirming the addition made by AO in the asstt order in respect of disallowance of Long Term Capital gain claimed u/s 10(38) of the Act & added to the income u/s68/69 as under- S. No. Name of company Am....
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....ecting the claim the Revenue relied on an investigation report of department which concluded that prices of certain scripts were being manipulated to generate artificial capital gains. The department held that the present assessees has also arranged long term capital gains on the script of Sulabh Engineers & Services Ltd. which was part of 84 penny stocks identified by the department in it's investigation report.. It was submitted that now these cases are covered in favour of the assessees by various orders of the Lucknow Bench of the Tribunal where under similar facts and circumstances and on various scripts including scrips dealt by the assessees, the bench has allowed relief to the assessees. Reliance in this respect was placed on the following case laws :- 1. Shri Jai Prakash Sharma Vs. DCIT, Central Circle-II, Kanpur in ITA No. 544/Lkw/2019. 2. Uma Shanker Dhandhania vs. ITO(1)5, Kanpur in ITA No. 475 & 681/Lkw/2019. 3. Smt. Madhu Agarwalla vs. ACIT in ITA No. 511/Lkw/2018. 4. Shri Achal Gupta vs. ITO-3(1), Kanpur in ITA No.501/Lkw/2019. 3. It was further submitted that even various other benches of the Tribunal has taken a similar view i....
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....hich were duly filed before the Assessing Officer and in this respect our attention was invited to various pages of paper books. 4. The ld. CIT, DR though heavily placed her reliance on the orders of the authorities below but fairly agreed that the issue are covered in favour of the assessee by various orders of the Tribunal by various benches. 5. We have heard the rival parties and have gone through the material placed on record. We find that assessees during the year under consideration sold certain shares of the script Sulabh Engineers and Services Ltd. through recognized stock exchange through screen based trading system and also through authorized stock brokers and filed before Assessing Officer various evidences of having sold these shares through these authorized brokers. 6. The copies of these documents in ITA No. 410/Lkw/2019 as filed before Assessing Officer are placed in Paper Book as detailed below: 1. Details of long term capital gain on sale of 291028 shares of Sulabh Engg. & Services Ltd. pg. 26. 2. Copy of detail of purchase P.B. Pg. 22. 3. Copy of notice for sub division of shares P.B. Pg.25. 4. Copy of assessee's accoun....
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.... Ltd. which has been credited in the DEMAT account of the assessee on 20.07.2012 such copy of DEMAT account is placed in P.B. page 64 to 65. 9. In the case of Shri Manoj Kumar Agarwal, the assessee did not directly purchase the shares but he got gift of 700000 shares from his father Maha Veer Prasad Agarwal a copy of gift deed is placed in P.B. pgs. 23-24. The allotment of such shares was directly made by company to Shri Maha Veer Prasad Agarwal father of the assessee and copy of allotment letter is placed in P.B. pg.28. The payment for the above shares was made by the father of assessee from his bank account in Bank of Baroda a copy of such bank account is placed in P.B. pgs. 29 to 45. The relevant entries are appearing in P.B. pg.34. Such shares were credited in the DEMAT account of assessee with Prabhat Financial Services Ltd. a copy of such DEMAT account statement is placed in P.B. pages 101 to 102. 9.1 These documentary evidences for purchase and sale of shares has not been disputed by the department and neither any adverse findings has been made on such evidences. The only reason for rejecting the claim of the assessees is the investigation report of department and cert....
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....gh banking channels. Copy of allotment letter from the company is placed at paper book pg.1 whereby the company had acknowledged the receipt of Rs.20.00 lacs and had allotted one lac shares to the assessee. The payment to the company was made from the bank account of the assessee, a copy of which is placed in paper book Pg. 2 to 8. A part of the shares were sold by India Infoline Ltd. in the two years and the contract notes issued by India Infoline are placed in paper book Pgs. 9 to 14 and 11 to 15 in the two years respectively. Copy of Demat Account of the assessee where the shares allotted by company were credited and from where the shares were sold is placed at paper book pgs. 33 to 40 and 24 to 31 respectively in the two years. The copy of bank account wherein the proceeds were credited is placed at pgs. 2 to 8 and 2 to 10 respectively for both years. From the contract notes issued by the broker India Infoline Ltd. we find that assessee had paid service tax and STT and shares were sold through screen based transactions wherein the exact time and order numbers are mentioned. The copy of Demat statement of assessee shows credit of ten lac shares and on sale of 1,11,700 during the....
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....deration for sale of 1,25,000 shares of M/s Sulabh Engineers and services ltd is placed in paper book vide,(PB-60 to 63). The Profit & loss account and computation of income for assessment year 2014-15 (PB-64 to 69) were also placed in the paper book. With help of these plethora documents and evidences, the ld Counsel claimed that long term capital gain on sale of equity shares of Sulabh Engineering and Services Ltd. of Rs. 1,12,13,010/- during the current financial year, is genuine. 8. We note that the assessee has earned long term capital gain on sale of equity shares of Sulabh Engineering and Services Ltd. of Rs. 1,12,13,010/- during the current financial year. During assessment proceedings details and evidences in support of purchase and sale of shares as asked for have been submitted before the learned Assessing Officer from time to time. However, the ld. Assessing Officer has treated the transaction in equity shares of M/s Sulabh Engineering and Services Ltd. as bogus and added Rs. 1,12,13,010/- being Long Term Capital Gain on sale of such equity shares only on the basis of his suspicion without bringing any adverse material on record in support of his contention in ....
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.... J. C. Agarwal HUF - ITYA No. 32/Agr/2007 (Agra ITAT) 14. Moreover it was submitted before us by ld AR that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in CSE. The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs.Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT - ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT - [2006] 6 SOT 247 (Mum) 15. We note that the....
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....owed relief to the assessee. Again SMC Kolkata Bench in ITA 1018 vide order dated 15.02.2019 allowed relief to the assessee on the same scrip and similar is the position of B bench of Kolkata wherein vide order dated 10.05.2019 in ITA Nos. 125 and 126 the same scrip of Sulab Engineering and Services Ltd. was considered and relief was granted to the assessee. 9.1 We further find that in a recent judgment by the Hon'ble Delhi High Court vide order dated 15.01.2021 in an appeal filed by Revenue against the order of Tribunal the Hon'ble Court in a consolidated order in three appeals dismissed the appeals of the Revenue. In I.T.A. No.125, on the basis of same investigation report, the Assessing Officer and CIT(A) had not allowed claim of the assessee of long term capital gain on the scrip M/s Gold Line International Finvest Ltd. In I.T.A. No. 130 and 131 similar claim was made on scrip of M/s Eastern Bio Organic Food Processing Ltd. and on scrip of Rander Corporation Ltd. The authorities below had not allowed claim of the assessee on the basis of same investigation report on the basis of which claim of the assessee has been rejected. These scrips are mentioned at Sl. No....
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....115BBE of the Act on account of bogus LTCG on sale of penny stocks of a company named M/s Gold Line International Finvest Limited. The appeal before the CIT(A) was dismissed and additions were confirmed with the observation that the Respondent had introduced unaccounted money into the books without paying taxes. Further appeal filed by the Respondent before the learned ITAT was allowed in her favour, and the additions were deleted vide the Impugned Order, relevant portion whereof reads as under: "21. A perusal of the assessment order clearly shows that the Assessing officer was carried away by the report of the Investigation Wing Kolkata. It can be seen that the entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirme....
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....d scam. The Assessing Officer has not even considered examining the brokers of the appellants. It is a matter of the fact that SEBI looks into irregular movements in share prices on range and warn investor against any such unusual increase in shares prices. No such warnings were issued by the SEBI. 26. There is no dispute that the statements which were relied by the Assessing Officer were not recorded by the Assessing Officer in the assessment proceedings but they were pre-existing statements recorded by the Investigation Wing and the same cannot be the sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opinion, neither the Assessing Officer conducted any enquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. The report of Investigation Wing is much later than the dates of purchase / sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhere SEBI has declared the transaction transacted at earlier dates as void. xx xx xx 30. Considering the vortex of evidences, we are of the consi....
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....bilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the ....
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....s issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been re....
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.... by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed." 10. In the above noted judgment, the Hon'ble court has held that startling spike in the share price and other factors may be enough to show circumstances that might create suspicion but the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The Hon'ble court further distinguished the judgment in the case of Suman Podar which was in favour of Revenue. The Hon'ble court further held that case of Sumati Dayal u/s CIT was also not applicable to the assessee. The Hon'ble court further held that reliance placed by the Assessing Officer on the investigation report of Investigation Wing without further corroborati....
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....hort 'the Act 1961") is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench dated 20-2- 2020 in the ITA No. 549/Ahd/2018 for the A.Y. 2014-15. The Revenue has proposed the following question of law for the consideration of this Court:- "Whether the Appellate Tribunal was right in law and on facts in deleting the addition of Rs. 9,70,468/- made on account of LTCG claimed as exempt u/s. 10(38) of the Act without appreciating the fact that the transaction was pre-arranged as well as sham and was carried out through penny scripts companies/paper companies?" 2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:- "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earn....